29 Nov South African clothing retailers turn from China to investing in local sources
29 Nov 2020
South African retailers, including The Foschini Group Ltd (TFG) and Woolworths Holdings Ltd, are increasing investment in local clothing manufacturers — both to reduce a dependency on Chinese imports and secure a supply chain thrown into disarray by COVID-19 restrictions.
The companies have signed up to an industry plan that includes a target to source 65 percent of their goods from local manufacturers within the next decade. While progress toward the goal varies per chain, the spread of COVID-19 has sharpened their collective focus.
The pandemic caused “such disruptions to the supply chain that everyone’s sitting back and saying do we ever really want to be that reliant on China ever again?” TFG chief executive Anthony Thunstrom said in an interview. “I think the penny’s dropped and retailers are looking more and more to buy locally.”
The initiative comes as South African President Cyril Ramaphosa looks to revive the cloth manufacturing industry, that would help achieve a goal of creating jobs, easing an official unemployment rate that is at a 17-year high.
“As South Africa opened to trade in the late 1990s, China came in and decimated the market as cost was the only dictating factor,” said Lawrence Pillay, head of sourcing at Woolworths. “But the world has changed radically and there is now so much more than just the cost. Sustainability, carbon footprints, challenges of logistics — all of these factors are going to force a rethink.”
Yet opening new factories during a pandemic will not be easy.
The industry’s decline has led to a shortage of skills, training and raw materials, meaning significant up-front investment would be required to eventually wring savings from shorter lead times and cheaper transport costs. That is at a time where consumer confidence is low, putting retailers on the back foot.
“There are certain products, like heavy winter jackets, that we just don’t have the materials and skills in South Africa to yet produce,” Thunstrom said.
South Africa will not manage to revive the industry in full because local retailers “can’t replace all the product ranges,” said Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.
TFG, which sources about 22 percent of its apparel locally, has hired 550 more workers across two South African factories this year and sees the potential to add several thousand more, Thunstrom said.
While South Africa works to revive its clothes-making industry, nearby countries such as Mauritius and Madagascar are also adding to their capabilities. The steps taken by those island nations are good examples of how self-sufficiency in the industry can be achieved, Pillay said.
“If we want our local retailers to get 65 percent of their product within the borders of South Africa, then we have to look at a broad scope of product categories,” he said. “In 28 years, I’ve never seen better co-operation between retailers, government, labor and manufacturers. In 10 years we can re-create the industry.”